When the coronavirus pandemic swept across the world in 2020, investors responded by pouring money into companies that would benefit from people spending much more time at home.
Netflix and Peloton were two of the biggest pandemic winners, along with video call provider Zoom Video and electronic signature firm DocuSign.
Now, the pandemic boom is over.
Netflix and Peloton lost roughly a fifth of their market value on Thursday after both companies disappointed investors.
They are not alone. Shares in pandemic darling DocuSign are down 57% over the past six months. Zoom Video has shed 54% over the same period.
Peloton acquires huge NC plant as part of $420M deal for fitness equipment firm
Netflix said in an earnings report that it added fewer subscribers than expected during the fourth quarter. Even more worrying, the streaming giant predicted that it would add just 2.5 million subscribers in the first three months of 2022, compared to 4 million in the same period last year.
Alarm bells: Netflix acknowledged in a letter to investors that competition from streaming rivals “may be affecting our marginal growth some.”
Netflix recorded a $607 million profit in the fourth quarter, and revenue increased 15% to $7.7 billion. But investors are focused on how quickly the company is growing, and they don’t like what they see — shares are down roughly 20% in premarket trade.
The situation at Peloton is more dire.
CEO John Foley acknowledged Thursday that Peloton is “considering all options” — including layoffs and production curbs — but denied a report that it would temporarily halt production of bikes and treadmills.
The statement came hours after CNBC reported that Peloton plans to pause production of its $1,495 lower-end bike for two months, and stop making Tread machines for six weeks, citing internal documents.
Foley did say that the company is “right-sizing” production in response to “seasonal demand curves,” and he alluded to potential job cuts.
“In the past, we’ve said layoffs would be the absolute last lever we would ever hope to pull,” he said. “However, we now need to evaluate our organization structure and size of our team, with the utmost care and compassion.”
Peloton shares sank nearly 24% on Thursday.
Both stocks had banner years in 2020. Shares in Netflix increased 67% that year, while Peloton gained an astonishing 434%.
Peloton shares lost momentum in 2021, while Netflix powered ahead. What unites the companies now is that both are struggling to find new customers as life gradually returns to normal — and investors have little sympathy.
Netflix is likely to be the most resilient of the bunch. The company has a huge head start in the streaming wars, and a proven track record of delivering for investors. Its shares are still up over 250% over the past five years.
